How do you hire a real employee?

Question

I am at my wit's end with independent contractors.  They always seem to put other clients before me and charge a lot (which I pay quickly).  What I usually need done are simple tasks such as cleaning, painting, click flooring, and yard care.  I often end up doing these low-skilled jobs myself because I can't get anybody else in fast enough.  I should be growing my business, not working in it.  Therefore, I've decided 2015 is the year I'm going to hire my first employee.  I'd like somebody who could eventually take over property management, except I'd still handle the finances.  I've called my insurer for a workers' comp quote.  Otherwise, I have no idea where to start.  Can anybody give me some advice?

Shane Pearlman · Answer

Hi Amy,

This is a struggle many business owners deal with. I'm going to answer your actual question first since no one else did, then debate the wisdom!

Hiring your First Employee

Recruiting: You need to find the right person. While doing your interviewing, be careful not to stumble over the protected classes discrimination issue ( http://en.wikipedia.org/wiki/Protected_class ). That means, you can't talk about things like race, religion, family, disability etc. Make sure you have a clear list of requirements and a grading scale. This should sound familiar as a landlord, since it is pretty close to the issues we face from HUD. Key think is to really figure out what the right blend of skills are that cover the majority of your needs.

Payroll & Taxes: You can't just cut someone a check. You have to withhold the right amount of money for things like social security, medicare, local and federal taxes. You will also need to pay the employer portion on top. You can either do this yourself (suck) or pay someone, either a bookkeeper or a specialized payroll provider. I pay about $150 per month for 7 employees.

Benefits: Full time, part time, salary, except, overtime... all things you need to figure out as the rules are different for each approach. For example, if you were to use an hourly employee, then you need to keep track of their time, and if they work more than 8 hours in a day, or 40 in a week, you owe them overtime. There are also laws about the type of leave / sick pay people get, as well as other forms of benefits.

Legal / Contract: Once you have the right person, you write them an offer letter. It will detail their job requirements and their compensation. Typically you also have some kind of company policy / handbook, that defines the rules of their employment. Things like, lunch breaks, or vacation policy, or how much money they can spend without written authorization.

Compliance: The laws around 1099s are vague, but ultimately simple. You just need to be sure they qualify using the IRS 20 guidelines. Compliance around employees is greater. People like OSHA now pay attention. Local government agencies want to collect paperwork and funding for employees: business license, office inspection are things we deal with.

Insurance: Workers comp is good. You will also need general liability. You might even want to consider E&O depending on the tasks they handle. If they drive, then make sure their vehicle is covered in case they hit someone while on the clock. You should probably also make sure they can make their repairs / fixes without a contractors license, or find someone who carries one.

1099s, and Why I think you Should Kiss More Frogs

Finding a good employee has been no easier than finding a good contractor. To put it in perspective, I have 33 part time contractors on my team. We added 11 new ones in 2014. 1 out of 5 made it long term. I think our best year ever was 1 / 3. You have to build good filtering systems, lean heavily on referrals, and always be recruiting. I just had a new handiman make some repairs to my home last that I could have done myself. It was a good opportunity to test someone. Sadly, he failed. Work was good, but he was stupid slow and was not organized in a way that would work unsupervised. I typically keep 2-3 handymen who passed on roster and try 3-5 a year on new tasks to keep my list current.

I could be wrong, but my experience having both is that employment won't solve this for you, but as @Paul Ewing eloquently stated, it will offer you a whole new family of migraines.

I did a talk in 2010 to a conference of business owners on how to find and manage independent contractors (Freelancers are slutty, but so are you: Strategies for the successful management of independent contractors). Maybe something in the slides might be of help: http://www.slideshare.net/shanepearlman/freelancer...

Paul Ewing · Answer

The only thing more stressful than dealing with independent contractors is having employees...

Account Closed · Answer

Amy A. Do you have enough work to keep someone busy full-time year round?  That itself can be a source of stress!  Plus Worker's Comp is very expensive though I don't think it's required for someone having less than 3 employees.

It sounds like you'd do better to find a reliable handyman but I know they're  hard to find.

Jeff S. · Answer

Amy A. feel your pain. This problem has always been a stumbling block for progress myself.

Do you have a Labor Ready in your area? I know a builder/remodeler that used to have employees and now only uses temp help through LR. He does a lot of high end work with good success.

Walter E. · Answer

@Amy Arata  my wife has been talking about us moving to the east coast in the next couple of years, perhaps we should move now :)

See if you can find someone that lives in one of your rentals.  I'm sure someone would love to help you if they didn't have to drive to work everyday.  We give our tenants rent credit whenever we need extra help

Bryan N. · Answer

I've found once you get them there add on to what you want done.  It's cheaper and they are more willing to stay.  But, they still suck and are never as dependable as yourself.  Contracting is one industry that could seriously use an overhaul and fresh prospective if not even some increased regulation.

Zana Blue · Answer

I used Labor Ready one time at a friend who does flips recommendation. They came late all jammed in one ratty car and they reeked of alcohol and this was at 9 in the morning. They broke things and then hid them and generally did a lousy job. I paid them and thankfully watched as they rattled off in their old jalopy and called my friend to berate him and he told me he would never use them and laughed and laughed funny not !

Amy A. · Answer

I had a roofer who used Labor Ready.  One clogged the toilet  and we ended up having to use sticks to get the wadded - up toilet paper and crap out.  He was running to the bathroom all day and never flushed!  NO joke!  We put it in a garbage bag and threw it out the window right before it started snowing.  It stayed buried under the snowbank until spring.

Another guy was hired to pick up shingles and averaged about 2 per minute.  He told me that they charged about $18 per hour!  So, I don't think they screen very well around here.

I've noticed that since I started renting and flipping properties that I have a lot of stories involving feces...  This is a glamorous life!

How do you hire a real employee?

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